Shortly after the Governor's budget and School Funding ideas were released, C.A.S.H. began working on an initiative to put a $9 billion school bond on the ballot in November 2016.  Since the January SAB meeting was cancelled, the first time we got to hear from our legislators was at an Assembly Education Committee Meeting on February 11th.  At this meeting, there were many speakers who covered the historic perspective on school facilities funding.  In general, everyone agreed that the current program has been successful.  There are challenges due to the number of agencies involved and the time it takes to get funded, but the real issues are the lack of funding due to the "great recession" and of course the "red tape" that has been added over the years to guarantee accountability, especially in the area of labor compliance.

The Department of Finance was representing the Governor's plan at this meeting.  There was no more information provided than was already known and discussed in my previous newsletter.  The concept presented was to increase the local district's ability to raise funding by increasing bond capacity and increasing developer fees.  The State would have a minimal role as a safety net for those districts that couldn't meet their needs with local funding.

There was quite a bit of criticism regarding this plan.  First, there was the obvious discrepancy that the rich districts should be fine but the poor would be left wanting since they would have to compete for very limited funding.  Next, there were issues with the political challenges in trying to pass bonds without being able to say the State would be matching the local funds raised.  Finally, the partnership between the State and District would be broken as developers would now be asked to help fill the gap left by the State by increasing the developer fees.

At the conclusion of this meeting, there was consensus that a State School Bond in 2016 would be the best alternative.

There were similar conversations at the Senate Education & Budget hearing on Feb 18th.  The biggest difference was that the Legislatie Analyst's Office released a report on what they thought could be a replacement program for school facilities.  This plan uses an annual allocation to every district based on enrollment.  This is an interesting approach that could potentially work, in my opinion, but the details of this specific program would not work (in my opinion).  A part of the plan is to allocate more funding to poorer districts and less funding for wealthier districts.  That part is reasonable as it would be relative to the bonding capacities of the districts.  However, the two problems with the plan include 1) the annual funding would be reduced based on how much of the State's current debt is due to projects previously funded by the OPSC and 2) the average facility need-per-student was estimated at around $1,000. 

If the State is basically asking for each district to "repay" its portion of the current State debt, then it is not accepting that the previous program funded valid facility needs.  More importantly, the funding level would not be sufficient to truly meet the facility needs for school districts.  For example, a district with a school that had 750 students would theoretically need $750,000 for its facility program.  Over a 30-year period, this would be a total of $22.5 million.  So, in the situation where a school needs to be built or replaced, you would have to save your revenues for 30 years in order to build the school.  And, of course, this full amount is not paid by the State.  Only 25% of it is paid for wealthier districts, 50% for average districts and 75% for poorer districts.  This funding level may be adequate for elementary schools, but it would fall short for middle schools and extremely short for high schools.  Of course, high school funding already has the biggest discrepancy between project needs and State funding levels.  As one of the Districts had commented, "this plan also shifts the costs of financing from the State to the local Districts." 

So, a real solution would need to have more detailed breakdowns of funding by the various grade levels and, of course, more funding overall.  The State original goal was to reduce its share of the school facility funding investment to as little as $250 million per year.  That is quite a difference from the $2 billion per year actually needed.

Another issue is that there was not any mention of a funding source for the over $1 billion in projects already in line for funding at OPSC.

The SAB meeting in February was the first SAB meeting of the year.  The biggest item we usually report on at the beginning of each year is the annual update on the grant adjustments.  This accounts for any inflation in construction costs.  However, this item was pulled from the agenda and will be heard at a future meeting. This is a bit ironic as the next meeting in March has already been cancelled.  So we will not find out until April, what last year's inflation rate was.  This is a challenge for district's collecting Level 2 developer fees as those studies use the State grant amounts in their calculations.  The developers may get a discount this year for those districts that are required to complete their studies before the new rates are available.

The consent calendar was approved and there was discussion on the Seismic program which included ideas for trying to improve the functionality and streamlining the program.  Any recommendations will be brought to a future SAB meeting.

One of the items that was approved with the "consent calendar" was the transfer of funds from the High Performance Incentive (HPI) Grant and the Career Technical Education (CTE) Program to the main new construction and modernization programs.  This effectively ends the Board's authority to allocate HPI funds as of January 1, 2015.

All of our clients and especially our small school district clients had really benefited from this program and we are sad to see it cancelled.

In terms of the new balance of funds, there is now $16.6 million in new construction, and $4.6 million in modernization.  There will be some funding available for the projects in line and there will be another bond sale in March which will allow for some allocations to be made at the April meeting.

The new regulations and guidelines for the Prop. 39 program were recently approved.  For those districts working with SchoolWorks on this program, we will be requesting funding for projects using these new rules.  Also, we now know that the annual funding for this program will not go below the minimum guarantees for each district size grouping.  The majority of the anticipated reductions for future year allocations will only impact the very large districts.